Giant Nationsbank Appears Leading Bidder For Chrysler First

October 16, 1992|by CONSTANCE WALKER, The Morning Call

The fourth-largest bank-holding company in the country reportedly is the leading prospect to buy Allentown-based Chrysler First, a unit of Chrysler Corp. that provides consumer lending, inventory financing of durable goods and commercial property loans.

Sources close to the negotiations said North Carolina-based NationsBank recently sent a team to Allentown to conduct the latter stages of "due diligence" -- a review of Chrysler First's assets and liabilities. Several sources, all speaking on condition of anonymity, said no deal has been completed but that an agreement could be reached as early as next week.

Chrysler First employs about 400 workers in the Lehigh Valley.

Local officials of Chrysler First referred all questions to Chrylser Financial Corp. in Michigan, the automaker's financing arm that controls Chrysler First. Chrysler Financial officials said a number of companies have shown interest in the Allentown unit but would not comment further.

Sources told The Morning Call that companies besides NationsBank remain interested in Chrysler First -- and could step in if a deal with NationsBank falls through -- but that the Charlotte bank-holding company is the most serious prospect.

Financial analysts who follow both the banking and automotive industries said a Chrysler First-NationsBank merger would be consistent with NationsBank's announced plans for expanding its consumer lending operations.

Chrysler Corp.'s poor financial performance last year -- it lost $795 million -- has forced the company to sell some of its non-automotive assets. Chrysler First was put up for sale in May as part of the strategy. No price tag has been disclosed, but company officials have said they hoped to complete a deal by the turn of the year.

The consumer-finance company, which has 2,300 employees in 193 offices across the country, has been a solid performer for the automaker since being acquired for $405 million in 1985, analysts said. The credit accounts serviced totaled $5.2 billion at the end of June, off $1.2 billion from the prior year. Third-quarter results are not out yet.

NationsBank -- which has $111 billion in assets -- was formed last December when Charlotte-based NCNB Corp. thwarted C&S Corp.'s efforts to escape a takeover.

In 1989, NCNB made a hostile bid to acquire Georgia-based C&S. Instead, C&S merged with Sovran Corp. based in Virginia, essentially hoping to grow too large for a takeover; instead, NCNB swallowed the merged C&S/Sovran.

The rise of super-regional NationsBank radically changed the southern banking structure, according to Arnold G. Danielson, president of Danielson Associates Inc., a Maryland-based bank consulting firm.

The institution stretches its arms from Maryland to Florida, with a large hand in Texas also. It holds about 10 percent of the South's deposit base -- more than its two closest rivals combined, he said.

"Acquiring Chrysler First would be consistent with NationsBank's strategy to increase its consumer lending and receivables portfolio," Danielson said.

Many other industry observes agreed, saying that NationsBank has not been secretive about its expansion plans. The company does 38 percent of its business in consumer-oriented lending under its General Bank Division in Atlanta and has set a goal of increasing that to 50 percent, mostly through acquisitions, they said.

John Mason, an analyst with Interstate/Johnson Lane in Atlanta, said NationsBank is exceptionally liquid -- meaning it has the ability to come up with the hundreds of millions of dollars needed to purchase a company like Chrysler First -- and that it has been buying credit-card operations "left and right" to increase its consumer-lending activity.

Like many other financial institutions, NationsBank is interested in increasing its fee-based businesses, said Katherine Hensel with Shearson Lehman Brothers in New York. "Its acquisition strategy includes bank as well as non-bank companies."

Acquiring Chrysler First "would definitely be in line with what NationsBank is looking to do," said Moshe Orenbuch, an analyst with Sanford C. Bernstein of New York.